What is a common example of a short-term incentive?

A common example of a short-term incentive is a bonus. Bonuses are typically designed to reward employees for achieving specific performance targets or company goals within a year or less. They are often tied to individual, team, or organizational performance and aim to motivate employees to reach specific outcomes. This monetary reward can significantly enhance employee motivation and alignment with the company’s short-term objectives, providing immediate recognition and satisfaction for their contributions.

In contrast, salary increases represent a long-term adjustment to an employee's base pay and are not tied to short-term performance. Stock options, which offer employees the right to purchase company stock at a predetermined price in the future, generally align with long-term company performance and employee retention rather than short-term goals. Benefit packages often provide additional health, retirement, and wellness benefits, but they also do not directly reward immediate performance outcomes, making them less reflective of short-term incentives.